With Budget Signing, State is Back in Business — Just in Time for the 4th

Legislative triple play — budget, Horizon bill, and Lottery transfer — break the logjam that brought all but essential services to a standstill across state

Credit: Governor's Office/Tim Larsen

Gov. Chris Christie announcing that a budget deal has been reached and that the government shutdown is over.

Three days after it was due from lawmakers, and following a day of intense negotiations inside the State House on Monday, Gov. Chris Christie signed into law early Tuesday morning a $34.7 billion state budget, ending a government shutdown that threatened to keep parks across New Jersey closed for the July 4th holiday.

The key breakthrough came as the Democratic leaders of the state Assembly and Senate met face-to-face on Monday with the chief executive of Horizon Blue Cross Blue Shield, the mammoth New Jersey insurance company that Christie has targeted for reform for the better part of 2017.

After Assembly Speaker Vince Prieto (D-Hudson) initially resisted any legislation changing the way the state regulates Horizon, the negotiations resulted in a compromise that Prieto could finally sign off on. That deal, which also received Horizon’s blessing, was announced around 10 p.m., and just after midnight, both the Assembly and Senate gave final passage to the Democrats’ budget bill, which added more than $300 million in spending to the budget Christie put forward in February. The rushed-together Horizon bill was also passed in both houses during the after-midnight voting sessions, and Christie signed the bill, and more importantly, the budget around 2:45 a.m. Tuesday, ending the government shutdown, the state’s first since 2006.

Horizon had role to play

Senate President Steve Sweeney and Assembly Speaker Vince Prieto announcing the deal on the Horizon bill.

The legislative leaders praised the breakthrough, citing the participation of Horizon chief executive Bob Marino as a key moment in breaking the impasse, which began Friday night after the state missed a deadline for the fiscal year 2018 budget bill that’s set in the state constitution. Christie, a second-term Republican now in his final months in office, also praised the deal, saying it will increase the company’s transparency and cap its reserves in the future. The budget deal, meanwhile, also involved a bill intended to help shore up the troubled public-employee pension system using a transfer of the state Lottery.

“In the end, none of this stuff can get done without all of us trying to work with each other,” Christie said during a news conference held just before midnight. That event capped a tumultuous day for the governor after photos were published in the Star-Ledger newspaper showing the governor and family members using the beach on an otherwise empty Island Beach State Park, where an official gubernatorial vacation home is located. The park and its beaches had been closed to the general public throughout the government shutdown, and the photos set off a national media frenzy of attacks on Christie. The governor shrugged off questions about the controversy during the late-night news conference, suggesting it was overblown by the media during a slow holiday weekend.

“I don’t apologize for it,” a defiant Christie told reporters in Trenton, of his use of the beach.

The making of a compromise

The compromise regarding Horizon, the state’s largest insurance company with 3.8 million policyholders and more than half the health insurance market, retains a number of the elements of an earlier bill sponsored by Sen. Joe Vitale, (D-Middlesex), the longtime health committee chairman, and passed by the Senate on Thursday. Prieto had adamantly refused to post Vitale’s original bill for a vote in the Assembly and disagreement over the measure hobbled any progress on the fiscal 2018 budget bill in that chamber. In fact, the vote in the Assembly had stalled all weekend, even as Prieto tried to force its passage by keeping the house in session around-the-clock.

Christie has targeted Horizon for reform in recent months, railing against the nonprofit company’s operations and trying to wrest $300 million from it to help fund his high-profile battle against opiate addiction. Horizon is the state’s only “health services corporation,” a unique designation created by lawmakers decades ago that has led it to play a more charitable role in exchange for certain tax breaks.

But the bill will not take effect until February 2018 — after Christie leaves office under the state constitution’s term limits — and it does not include one of the most controversial aspects: an opening for state officials to raid the company’s reserves for their own purposes. Instead, any extra funds will be used to benefit policyholders directly — something that Prieto and others in his caucus said was critical to gain their support for the measure.

Appropriate reserves

The revised Vitale bill (S-2) codifies a range of appropriate reserves from 550 percent to 725 percent of risk-based capital, or RBC, an actuarial calculation of their risk; the previous bill would have prompted a public process to determine the reserve level. The compromise proposal requires the state to commission an independent annual audit of Horizon, at the company’s expense.

Under the compromise legislation, the company needs to craft a plan — to be approved by the state — to use excess reserves to reduce premiums for future policyholders, or otherwise benefit Horizon members. Horizon reported nearly $2.4 billion in reserves at the end of 2016, about 620 percent, enough to pay 75 days worth of claims for all members.

The new bill also requires Horizon to file financial information, including executive compensation details, to Department of Banking and Insurance for the agency to post on its website; executive compensation became a hot-button issue for Christie in his campaign against the company. It would also add two more members to the 15-person board, to be appointed by legislative leaders.

Establishing limits

"This legislation establishes appropriate limits for Horizon's reserve, which comes out of the pocket of policyholders, and a process to allocate any excess reserve funds to the benefit of policyholders," Vitale said. "It provides greater transparency so that consumers know exactly how much their insurer spends and for what purpose.”

"Equally important is what this bill does not do," Vitale said. "It will not raise premiums for Horizon customers. It will not take away anyone's health insurance. And it will not give any governor the power to take millions of dollars in Horizon Blue Cross Blue Shield reserves to pay for state programs.”

Marino, in a statement issued late Monday night, credited the compromise legislation, saying it would not impose “unfair or excessive obligations.”

Prieto, who overcame whispers that he could lose his leadership position due to the budget impasse, said the compromise preserves a Democratic spending plan that will fund a number of key priorities that Christie has previously used the line-item veto to remove from prior budget proposals, including beefed up aid for pre-K. He also said getting a “seal of approval” from Horizon was key.

“It’s unfortunate we had to get to this point,” Prieto said. “I wish we would have been able to do this before.”

Sweeney had refused altogether to post the Democrats’ budget in his house after cutting a deal earlier with Christie that involved getting the governor’s assurances that he would not line-item veto the Democratic spending priorities this year if he received a Horizon bill and the Lottery transfer legislation along with the fiscal 2018 budget. Sweeney said his top priority was securing $150 million in additional aid for local schools and another $31 million in funding that will be reallocated to schools that are considered “underfunded” according to the state’s school-aid law.